The Terrible, Horrible, No Good, Very Bad Year

With apologies to author Judith Viorst, the title of her ‘Alexander’ book from 1972 seemed perfect for my 2020 year-end article. This has been a terribly difficult year for many of us although there were some bright spots along the way.

While I enjoy writing about all things financial, it’s not always pleasant going back through my articles to see how my various predictions turned out. I started the year on safe ground with an update on tax law changes. People who have retirement accounts have always been required to take minimum distributions from them. However, late in 2019, Congress moved the starting point from age 70½ (where did that come from?) to 72. I called the article 72 Is the New 70½ and went over several additional provisions from the 715-page SECURE Act. I mentioned that I hadn’t finished reading it at that point but doubted if many of those who voted for it had either.

My next two articles dealt with more general financial planning topics, including a review of budgeting, investment and insurance strategies in Why Do We Cut the End Off the Ham? I went on to cover estate planning and tax issues in Why Do We Cut the End Off the Ham? (Part 2). I wrapped up the article with the thought that financial planning should be thought of as an integrated whole, not a series of uncoordinated actions.

Then I returned to high school with The Calculus of Market Movements in which I tried to separate the daily hype of headline writers from the longer term view of investing which we believe is critical to success. I closed this one by borrowing Britain’s WW II slogan: Keep Calm and Carry On. In a very difficult year, I believe that continues to be good advice.

I wrote Quoth Warren Buffett during the March market correction. This time, I was right in thinking that the market’s quickest drop ever into bear territory wouldn’t last and would eventually lead to a new bull market, as had always happened previously. While I was confident of the outcome, I must say I was surprised at how quickly things reversed. Conversely, I was quite wrong about the severity of Covid-19. In my next article Cloudy, I suggested ‘we’d get though it’ as we had done with previous variants bird and swine flu. Like many commentators, I had no idea just how deadly this strain would prove to be. I returned to safe financial planning ground in Enough Cash For A Cadillac, describing our process for determining a client’s risk tolerance. Next, I quoted comedian Mort Sahl when I asked Would you Buy a Used Car From This Man? in relation to celebrity pitchmen. With Tom Selleck selling one specific brand of reverse mortgage and Joe Namath one specific brand of supplemental Medicare coverage, I asked if shopping around for the best fit for your specific needs might not make more sense that just following their (bought and paid for) advice.

I shared my concern that the stock market was getting overheated in Symbolism, featuring a discussion of both stock trading symbols and a non-symbol: FOMO (fear of missing out). While I suggested that the market might be due for a correction, it continued to climb another eleven percent over the next four months. The next week, I shared one of the reasons for my concern, the fact that the gains of six tech stocks represented more than 100% of the gains of the S&P 500 (year to date). That is those six were up in value and the other 494 were down. This continues to be a concern of mine (and markets continue to climb).

In the fall, I paused to acknowledge Warren Buffet’s birthday, thanking him for all of the good advice he’s shared over his career, then went back to some financial planning thoughts with the help of Frank Sinatra. I used his song “It Was a Very Good Year” to take readers through some life stages and how financial planning might fit into each. I mentioned the need for health insurance coverage later in life and fleshed out that thought with more details about Medicare supplements in A Reader Poll.

In my final article, Too Much of a Good Thing, I raised concerns about Tesla being added to the S&P 500. I suggested that an additional large tech company would expose average investors to additional risk. With the six largest companies representing a quarter of the index’s performance, it wouldn’t take much of a stumble by one of them to have a significant negative impact on index investors. The index is up an additional one percent since I wrote that article.

With family visits ruled out for many, the holidays have been as lonely as anyone can remember. Yet through all the school, business and restaurant closures, markets have done extremely well. Those who sold during March’s bear market are beginning to think that maybe everything will be OK and may soon decide to invest again. If history is a teacher, they’ll buy back in near the market top and will lose much of their investment during the next (inevitable) correction.

For many of us, stock markets have been the high point of an otherwise pretty dreadful year. Another peak event is occurring as I write this: the approval and distribution of two Covid-19 vaccines to be followed by a full pipeline of others. While this is wonderful news in a country where one in a thousand of us have died of Covid, I think my greatest fear is the division among us. Whether looking at national politics or local relationships, our population has become polarized. My readership is pretty small but I’d like to suggest that our nation will have its best chance of survival if people resume talking to, not past, each other. Whether your primary news source is One America or MSNBC, I’d like to suggest that you listen to the other from time to time, just to hear a different point of view. My notably liberal wife reads the conservative Wall Street Journal several times a week. She jokes that it’s ‘to find out what the enemy is up to’ but I suspect the truth is more a conscious attempt to keep learning about other perspectives. Whatever news source you favor, may I make a further suggestion? If you’re spending more than an hour a day with it, why not cap your exposure and spend the additional time reading, taking a walk (outside if you can), listening to music or talking with friends? Your mind and body will thank you.

Here’s wishing you and yours a much improved New Year.